TABLE	  OF	  CONTENTSStatement	  of	  Constitutional	  and	  Legal	  Authority	  ............................................
STATEMENT	  OF	  CONSTITUTIONAL	  AND	  LEGAL	  AUTHORITYArticle	  I	  of	  the	  U.S.	  Constitution	  grants	  Congress	...
A	  CONTRAST	  IN	  VISIONS                                                The	  President’s	  Budget                     ...
House	  Budget	  Committee	  |	  March	  20,	  2012	     	     	     6
INTRODUCTION                                                    By	  House	  Budget	  Committee	  Chairman	  Paul	  RyanTh...
The	  federal	  government	  has	  the	  power	  to	  raise	  revenue	  so	  that	  it	  can	  effectively	  carry	  out	  ...
Today,	  America	  is	  struggling	  to	  recover	  from	  a	  great	  recession.	  Her	  people’s	  liberties	  are	  end...
House	  Budget	  Committee	  |	  March	  20,	  2012	     	     	     10
A	  BLUEPRINT	  FOR	  AMERICAN	  RENEWAL                                                                                  ...
Unfortunately,	  in	  the	  years	  following	  the	  meltdown,	  the	  President	  and	  his	  party’s	  leaders	  failed...
The	  role	  of	  the	  federal	  government	  is	  both	  vital	  and	  limited.	  When	  government	  takes	  on	  too	 ...
3. Strengthen	  the	  Social	  Safety	  Net	  This	  budget	  builds	  upon	  the	  historic	  progress	  of	  bipartisan	...
5. Enact	  Pro-­‐Growth	  Tax	  ReformThis	  budget	  recognizes	  that	  the	  nation’s	  fiscal	  health	  requires	  a	 ...
House	  Budget	  Committee	  |	  March	  20,	  2012	     	     	     16
PROVIDING	  FOR	  THE	  COMMON	  DEFENSE                       PROVIDING FOR THE COMMON DEFENSE                           ...
 House	  Budget	  Committee	  |	  March	  20,	  2012	     	            	     18
PROVIDING	  FOR	  THE	  COMMON	  DEFENSE	                                                                  The	  Challenge...
Because	  the	  JSCDR	  failed	  to	  produce	  a	  bill,	  the	  sequester	  is	  scheduled	  to	  take	  effect	  beginni...
Without	  the	  defense	  cuts,	  there	  would	  be	  no	  deficit	  reduction,	  and	  without	  the	  tax	  increases,	 ...
Congress	  has	  no	  higher	  responsibility	  than	  to	  ensure	  that	  the	  President	  has	  available	  all	  the	...
RESTORING	  ECONOMIC	  FREEDOM                                  RESTORING ECONOMIC FREEDOM                                ...
House	  Budget	  Committee	  |	  March	  20,	  2012	     	     	     24
RESTORING	  ECONOMIC	  FREEDOM                                                       The	  Challenge:	  A	  More	  Bureauc...
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The ryan budget

  1. 1. TABLE  OF  CONTENTSStatement  of  Constitutional  and  Legal  Authority  .....................................................4A  Contrast  in  Visions  ..............................................................................................5Introduction  By  House  Budget  Committee  Chairman  Paul  Ryan   ................................7I. A  Blueprint  for  American  Renewal  ................................................................11II. Providing  for  the  Common  Defense  ..............................................................17III. Restoring  Economic  Freedom  ......................................................................23IV. Repairing  the  Social  Safety  Net  ....................................................................35V. Strengthening  Health  and  Retirement  Security   ............................................45VI. Pro-­‐Growth  Tax  Reform  ...............................................................................57VII. Changing  Washington’s  Culture  of  Spending  .................................................69VIII. Lifting  the  Crushing  Burden  of  Debt  .............................................................75Appendix  I:  Summary  Tables  .................................................................................87Appendix  II:  Reprioritizing  Sequester  Savings  ........................................................93
  2. 2. STATEMENT  OF  CONSTITUTIONAL  AND  LEGAL  AUTHORITYArticle  I  of  the  U.S.  Constitution  grants  Congress  the  power  to  appropriate  funds  from  the  Treasury,  pay  the  obligations  of  and  raise  revenue  for  the  federal  government,  and  publish  statements  and  accounts  of  all  financial  transactions.  In  addition,  the  Congressional  Budget  and  Impoundment  Act  of  1974  requires  Congress  to  write  a  budget  each  year  representing  its  plan  to  carry  out  these  transactions  in  the  forthcoming  fiscal  years.  While  the  President  is  required  to  propose  his  administration’s  budget  requests  for  Congress’s  consideration,  Congress  alone  is  responsible  for  writing  the  laws  that  raise  revenues,  appropriate  funds,  and  prioritize  taxpayer  dollars  within  an  overall  federal  budget.The  budget  resolution  is  the  only  legislative  vehicle  that  views  government  comprehensively.  It  provides  the  framework  for  the  consideration  of  other  legislation.  Ultimately,  a  budget  is  much  more  than  series  of  numbers.  It  also  serves  as  an  expression  of  Congress’s  principles,  vision,  and  philosophy  of  governing.This  budget,  submitted  to  the  U.S.  House  of  Representatives  for  fiscal  year  2013  and  beyond,  builds  upon  the  budget  that  was  written  and  passed  by  the  House  last  year.  Like  last  year’s  budget,  it  is  offered  on  time,  in  accordance  with  the  1974  Budget  Act,  out  of  respect  for  the  law  and  in  order  that  the  public  be  given  a  timely  and  transparent  accounting  of  government’s  work.Like  last  year’s  budget,  it  is  committed  to  the  timeless  principles  enshrined  in  the  U.S.  Constitution  –  liberty,  limited  government,  and  equality  under  the  rule  of  law.And  like  last  year’s  budget,  it  seeks  to  guide  the  nation’s  policies  by  those  principles,  freeing  it  from  the  crushing  burden  of  debt  now  threatening  its  future.  This  budget  is  submitted,  as  prescribed  by  law,  to  clarify  the  challenges  and  the  choices  facing  the  American  people,  provide  a  blueprint  for  the  orderly  execution  of  Congress’s  constitutional  duties,  and  describe  a  path  forward  that  renews  the  promise  of  this  exceptional  nation.  House  Budget  Committee  |  March  20,  2012       4
  3. 3. A  CONTRAST  IN  VISIONS The  President’s  Budget The  Path  to  Prosperity Spending Net  $1.5  trillion  increase  relative  to   Cuts  spending  by  $5  trillion  relative  to  President’s   current  policy budget Taxes Imposes  a  $1.9  trillion  tax  increase;   Prevents  President’s  tax  increases;   Adds  new  complexity  and  new  hurdles   Reforms  broken  tax  code  to  make  it  simple,  fair,   for  hardworking  taxpayers,  making  it   and  competitive;  clears  out  special  interest   more  difficult  to  expand  opportunity loopholes  and  lowers  everybody’s  tax  rates  to   promote  growth Deficits Four  straight  trillion-­‐dollar  deficits;   Brings  deficits  below  3  percent  of  GDP  by  2015;   Breaks  promise  to  cut  deficit  in  half  by   Reduces  deficits  by  over  $3  trillion  relative  to   end  of  first  term;  Budget  never  balances President’s  budget;  Puts  budget  on  path  to   balance Debt Adds  $11  trillion  to  the  debt  –  increasing   Reduces  debt  as  a  share  of  the  economy  over  the   debt  as  a  share  of  the  economy  –  over   next  decade;  Charts  a  sustainable  trajectory  by   the  next  decade;  Imposes  $200,000  debt   reforming  the  drivers  of  the  debt;  Pays  off  the   burden  per  household;  Debt  skyrockets   debt  over  time in  the  years  ahead Size  of  Government Size  of  government  never  falls  below  23   Brings  size  of  government  to  20  percent  of   percent  of  the  economy,  making  it  more   economy  by  2015,  allowing  the  private  sector  to   difficult  to  expand  opportunity grow  and  create  jobs National  Security Slashes  defense  spending  by  nearly  $500   Prioritizes  national  security  by  preventing  deep,   billion;  Threatens  additional  cuts  by   indiscriminate  cuts  to  defense;  Identifies  strategy-­‐ refusing  to  specify  plan  of  action  to   driven  savings,  while  funding  defense  at  levels   address  the  sequester;  Forces  troops   that  keep  America  safe  by  providing  $554  billion   and  military  families  to  pay  the  price  for   for  the  next  fiscal  year  for  national  defense   Washington’s  refusal  to  address  drivers   spending of  debt Health  Security Doubles  down  on  health  care  law,   Repeals  President’s  health  care  law;  Advances   allowing  government  bureaucrats  to   bipartisan  solutions  that  take  power  away  from   interfere  with  patient  care;  Empowers   government  bureaucrats  and  put  patients  in   an  unaccountable  board  of  15  unelected   control;  No  disruption  for  those  in  or  near   bureaucrats  to  cut  Medicare  in  ways  that   retirement;  Ensures  a  strengthened  Medicare   result  in  restricted  access  and  denied   program  for  future  generations,  with  less  support   care  for  current  seniors,  and  a  bankrupt   given  to  the  wealthy  and  more  assistance  for  the   future  for  the  next  generation poor  and  the  sickHouse  Budget  Committee  |  March  20,  2012       5
  4. 4. House  Budget  Committee  |  March  20,  2012       6
  5. 5. INTRODUCTION By  House  Budget  Committee  Chairman  Paul  RyanThis  budget  offers  a  blueprint  for  safeguarding  America  from  the  perils  of  debt,  doubt  and  decline.  Americans,  not  Washington,  deserve  to  choose  the  path  their  nation  takes,  and  this  budget  presents  a  clear  choice  between  the  bleak  future  toward  which  the  nation  is  currently  headed  and  the  prosperous  future  that  Americans  can  build  together  with  a  government  that  is  limited  and  effective.  Effective  government  is  impossible  without  limits.  It  is  no  surprise  that  trust  in  government  has  reached  all-­‐time  lows  as  the  size  of  government  has  reached  all-­‐time  highs.  The  Founders  put  limits  on  government  because  they  understood  the  limits  of  government.  In  James  Madison’s  formulation,  “If  men  were  angels,  no  government  would  be  necessary.  And  if  angels  were  to  govern  men,  neither  external  nor  internal  controls  on  government  would  be  necessary.”  As  Madison  reminded  us,  men  are  no  angels,  and  government  is  “administered  by  men  over  men.”  The  Founders  met  this  challenge  by  designing  a  Constitution  of  enumerated  powers,  giving  the  federal  government  broad  authority  over  only  those  matters  that  must  have  a  single  national  response,  while  sharply  restricting  its  authority  to  intrude  on  those  spheres  of  activity  better  left  to  the  states  and  the  people.  The  first  responsibility  of  the  federal  government  is  the  safety  and  security  of  all  Americans.  Today,  the  men  and  women  of  the  U.S.  military  valiantly  devote  themselves  to  protecting  American  lives  and  liberty.  Peace  at  home  is  only  possible  when  America  is  strong.  When  America  shrinks  from  her  commitments  to  her  allies  and  her  duties  to  her  citizens,  her  enemies  are  emboldened  and  her  ideals  are  diminished.  This  overarching  governmental  responsibility  –  securing  the  inherent  rights  of  all  Americans  to  life,  liberty,  and  the  pursuit  of  happiness  –  is  the  principle  and  the  purpose  that  informs  this  entire  federal  budget.The  federal  government  also  has  a  critical  role  to  play  in  safeguarding  the  free-­‐enterprise  system,  so  that  fraud  is  punished,  success  is  rewarded,  and  the  rules  are  not  rigged  against  the  small  businessman,  the  innovator,  or  the  worker.  In  Abraham  Lincoln’s  words,  the  true  object  of  government  should  be  “to  clear  the  paths  of  laudable  pursuit  for  all,”  so  that  all  may  have  the  same  opportunity  to  rise.  The  federal  government  can  help  provide  a  strong  safety  net  for  Americans  who,  through  no  fault  of  their  own,  have  fallen  on  hard  times.  But  government  can  never  replace  the  core  institutions  of  a  vibrant  civil  society  –  families,  neighbors,  churches  and  charities.  Aimed  first  and  foremost  at  buttressing  these  institutions,  government  reforms  should  promote  upward  mobility  and  secure  opportunity,  especially  for  society’s  most  vulnerable.  Over  the  past  century,  the  American  people  have  sought  to  furnish  a  strong  and  stable  base  of  health  and  retirement  security  for  working  families.  In  a  free  society  built  on  entrepreneurial  risk-­‐taking  and  hard  work,  such  protection  provides  insurance  against  the  vagaries  of  life.  But  when  government  mismanagement  and  political  cowardice  turn  this  element  of  the  social  contract  into  an  empty  promise,  seniors  are  threatened  with  denied  access  to  care  and  the  next  generation  is  threatened  with  a  debt  that  destroys  its  hard-­‐earned  prosperity.  Both  consequences  would  violate  President  Lyndon  B.  Johnson’s  pledge  upon  signing  the  Medicare  law:  “No  longer  will  older  Americans  be  denied  the  healing  miracle  of  modern  medicine…  No  longer  will  young  families  see  their  own  incomes,  and  their  own  hopes,  eaten  away  simply  because  they  are  carrying  out  their  deep  moral  obligations  to  their  parents,  and  to  their  uncles,  and  their  aunts.”  To  fulfill  Johnson’s  pledge  in  the  21st  century,  America’s  generations-­‐old  health  and  retirement  security  programs  must  be  saved  and  strengthened.House  Budget  Committee  |  March  20,  2012       7
  6. 6. The  federal  government  has  the  power  to  raise  revenue  so  that  it  can  effectively  carry  out  those  missions  entrusted  to  it  by  its  citizens.  But  when  taxation  is  carried  to  injurious  excess  to  fund  activities  outside  the  proper  sphere  of  government,  it  not  only  harms  the  general  welfare,  but  also  suppresses  revenue  itself.  As  Alexander  Hamilton  –  whose  fiscal  plan  brought  national  prosperity  while  eliminating  America’s  first  federal  debt  –  once  observed,  “the  most  productive  system  of  finance  will  always  be  the  least  burdensome.”Finally,  the  federal  government  has  an  obligation  to  all  Americans  to  account  for  the  spending,  taxing,  and  borrowing  that  it  undertakes  in  their  names.  But  when  the  federal  budgeting  process  is  ignored,  government  spends  haphazardly,  without  priorities  or  the  transparency  on  which  democracy  depends.In  each  of  these  core  areas,  the  unchecked  growth  of  government  has  degraded  its  effectiveness  and  rendered  its  institutions  incapable  of  meeting  the  challenges  of  the  21st  Century. • The  U.S.  military  faces  a  three-­‐fold  threat:  an  abatement  of  America’s  commitment  to  defend  its  interests   abroad,  a  slow  economy,  and  an  uncontrolled  debt  burden  that  weakens  America  from  within  by  eroding   resources  for  national  defense; • The  free  enterprise  system  is  being  stifled  by  a  federal  bureaucracy  fixated  on  depriving  citizens  and  businesses   of  their  ability  to  make  social  and  economic  decisions  according  to  what  is  best  for  their  own  needs  and   interests.   • The  social  safety  net  is  failing  society’s  most  vulnerable  citizens  and  poised  to  unravel  in  the  event  of  a   spending-­‐driven  debt  crisis,  which  is  precisely  when  Americans  would  need  it  most;   • The  future  of  the  nation’s  health  and  retirement  security  programs  is  increasingly  based  on  empty  promises   from  a  government  unwilling  to  advance  solutions  that  save  and  strengthen  them; • The  tax  code  has  become  a  broken  maze  of  complexity  and  political  favoritism;  it  is  overgrown  with  special-­‐ interest  loopholes  and  characterized  by  high  rates,  both  of  which  stifle  economic  growth  and  job  creation;  and • The  federal  budget  process  has  collapsed,  allowing  government  to  spend  recklessly  and  throw  tax  dollars  at   problems  on  an  ad  hoc  basis  as  the  nation’s  fiscal  hole  grows  deeper.The  good  news  is  that  solutions  to  these  problems  are  more  attainable  today  than  they  have  been  in  years:  There  is  an  emerging  consensus  –  led  by  citizens  across  the  nation  and  reformers  across  the  political  spectrum  –  that  is  well  aware  of  the  danger.  This  consensus  rejects  politicians  who  focus  on  dividing  Americans  for  political  gain.  Instead,  it  supports  bold  reforms  that  bring  Americans  together  to  build  upon  the  solid  foundations  of  security  and  liberty  that  have  made  this  nation  exceptional: • A  military  that  keeps  America  safe  by  letting  national  strategic  priorities  determine  spending  levels,  not  the   other  way  around; • A  free  enterprise  system  that  is  reinvigorated,  with  bureaucracy  restrained,  the  rule  of  law  restored,  and   cronyism  and  corporate  welfare  eliminated; • A  safety  net  that  directs  assistance  to  those  who  need  it  most,  provides  greater  incentives  to  work  and  save,   and  strengthens  programs  aimed  at  job  training  and  helping  Americans  get  back  on  their  feet; • Health  and  retirement  programs  that  avert  the  sharp  disruptions  to  come  as  a  result  of  the  President’s  policies,   protect  key  commitments  to  seniors,  and  provide  greater  choices,  better  health,  and  real  security  for  future   generations; • A  tax  code  that  fosters  growth  and  job  creation  by  lowering  rates  and  getting  rid  of  special-­‐interest  loopholes   that  mainly  benefit  the  politically  well-­‐connected,  distort  economic  growth,  and  encode  unfairness  in  tax  law;   and • A  budget  process  that  restrains  government  spending  and  restores  certainty  by  forcing  policymakers  to  provide   solutions  for  the  nation’s  fiscal  future.This  nation  has  faced  many  tests  in  its  history  –  moments  in  time  when  the  very  idea  of  America  was  threatened  by  crises  at  home  and  abroad.  Each  time,  Americans  rejected  radical  proposals  to  remake  this  exceptional  nation  in  the  image  of  less-­‐free  nations  abroad.  Instead,  principled  leaders  and  brave  citizens  rose  to  meet  the  difficulties  they  faced  by  applying  the  nation’s  enduring  founding  principles  to  the  challenges  of  their  times.House  Budget  Committee  |  March  20,  2012       8
  7. 7. Today,  America  is  struggling  to  recover  from  a  great  recession.  Her  people’s  liberties  are  endangered  by  unwarranted  expansions  of  government.  And  she  is  threatened  by  a  rising  tide  of  debt  at  home  and  fierce  enemies  abroad.  But  as  the  challenge  grows,  so  does  the  opportunity  to  restore  America’s  promise  and  prosperity.  In  the  words  of  Winston  Churchill,  this  generation  has  the  opportunity  "to  rejoice  in  the  responsibilities  with  which  destiny  has  honored  us…  and  be  proud  that  we  are  guardians  of  our  country  in  an  age  when  her  life  is  at  stake."  We  must  not  let  this  opportunity  slip  away.  This  budget  serves  as  a  blueprint  for  American  renewal.  Its  principled  reforms  empower  individuals  with  greater  control  over  their  futures.  It  places  great  faith  in  the  wisdom  of  the  Founders  and  promises  to  renew  confidence  in  the  superiority  of  human  freedom.  The  choice  of  two  futures  presented  in  this  budget  is  premised  on  the  wisdom  of  the  American  people  to  build  a  prosperous  future  for  themselves  and  for  generations  of  Americans  to  come. Paul  Ryan Chairman  of  the  House  Budget  Committee Member  of  Congress,  First  District  of  Wisconsin March  20,  2012House  Budget  Committee  |  March  20,  2012       9
  8. 8. House  Budget  Committee  |  March  20,  2012       10
  9. 9. A  BLUEPRINT  FOR  AMERICAN  RENEWAL A  Nation  ChallengedThe  challenges  this  nation  faces  are  among  the  largest  in  its  history.  For  years,  bad  policies  advanced  by  both  political  parties  have  contributed  to  an  irresponsible  build-­‐up  of  debt  in  the  economy,  and  this  debt  now  poses  a  fundamental  challenge  to  the  American  way  of  life.  This  build-­‐up  of  debt  has  manifested  its  effects  in  both  the  private  and  public  sectors.  In  2008,  excessive  leverage  in  the  financial  sector  overwhelmed  many  banks,  businesses  and  families.  Irresponsible  decisions  in  Washington  and  on  Wall  Street  fueled  a  housing-­‐price  bubble  that  collapsed  and  turned  mortgage-­‐backed  securities  into  “toxic  assets.”  It  soon  became  clear  that  these  assets,  which  were  spread  throughout  the  financial  sector,  posed  a  systemic  risk  to  the  economy.  The  resulting  wave  of  panics,  bankruptcies  and  foreclosures  brought  the  global  financial  system  to  the  brink  of  collapse.America  is  still  living  with  the  painful  consequences  of  that  crisis  today.  While  some  of  the  federal  government’s  emergency  actions  in  late  2008  helped  to  stem  the  immediate  financial  crisis,  much  of  its  intervention  in  the  wake  of  the  crisis  simply  aggravated  the  underlying  problems.  In  most  cases,  policymakers  sought  to  address  the  symptoms  of  the  crisis  by  transferring  private-­‐sector  debt  to  the  public  balance  sheet.  Since  Election  Day  2008,  debt  held  by  the  public  has  increased  by  roughly  $4.5  trillion  –  an  increase  in  excess  of  70  percent  in  a  mere  four  years.  This  remedy  didn’t  just  ignore  the  underlying  cause  of  the  problem  –  it  made  the  problem  far  worse.  In  Europe,  the  accumulation  of  public-­‐sector  debt  now  threatens  to  cause  an  even  bigger  calamity  than  the  one  caused  by  private-­‐sector  debt  in  2008.  The  world’s  new  “toxic  asset”  is  the  sovereign  debt  of  irresponsible  European  governments,  infecting  the  balance  sheets  of  major  banks  and  threatening  the  stability  of  the  global  economy.  And  in  the  United  States,  government  debt  continues  to  rise  at  a  frightening  pace,  raising  fears  that  a  similar  crisis  may  happen  here.  The  growing  possibility  of  such  a  crisis  is  creating  debilitating  uncertainty  about  the  future,  hurting  job  creation  and  economic  growth  today.  The  economy  has  picked  up  in  recent  quarters,  but  overall  growth  and  job  creation  remain  sub-­‐par,  and  unprecedented  numbers  of  Americans  have  simply  given  up  trying  to  find  work. Real  GDP  grew  by  just  1.7  percent  in  2011,  and  private-­‐sector  forecasters  are  calling  for  growth  of  2.3  percent  in  2012  –  well  below  the  3.0  percent  historical  trend  rate  of  U.S.  growth  and  just  a  fraction  of  the  growth  pace  observed  in  a  typical  recovery  from  recession.  Noted  economists,  including  Federal  Reserve  Chairman  Ben  Bernanke,  have  argued  that  enacting  a  credible  plan  to  deal  with  America’s  long-­‐term  debt  build-­‐up  would  have  a  positive  effect  on  growth  and  jobs  immediately.1  1  For  more  detail,  see  “Debt  as  an  Impediment  to  Growth”  on  page  74  of  this  report.  House  Budget  Committee  |  March  20,  2012       11
  10. 10. Unfortunately,  in  the  years  following  the  meltdown,  the  President  and  his  party’s  leaders  failed  to  use  their  full  control  of  Washington  to  offer  any  plan  to  lift  the  debt  and  foster  sustainable  economic  growth.  Instead,  the  crisis  was  used  as  an  excuse  to  enact  unprecedented  and  counterproductive  expansions  of  government  power.  A  massive  stimulus  package  failed  to  deliver  promised  reductions  in  unemployment.  An  unpopular  health  care  takeover  was  jammed  through  Congress  on  a  party-­‐line  vote.  A  short-­‐sighted  financial-­‐regulatory  overhaul  failed  to  fix  what  was  broken  on  Wall  Street  and  made  future  bailouts  more  likely.  And  federal  policymakers  in  thrall  to  a  misguided  form  of  environmental  activism  pushed  through  regulations  and  other  policies  that  are  making  energy  more  expensive  in  the  midst  of  a  weak  economy.  Through  it  all,  the  government’s  fiscal  position  sharply  deteriorated.  Total  federal  debt  has  now  surpassed  the  size  of  the  entire  U.S.  economy.  And  the  government’s  non-­‐partisan  auditors  have  issued  report  after  report  warning  of  even  larger  debts  to  come,  driven  by  health  and  retirement  security  programs  that  are  being  weakened  by  severe  demographic  and  economic  challenges.  Instead  of  taking  action,  the  administration  punted  the  nation’s  fiscal  problems  to  a  bipartisan  commission,  whose  recommendations  it  proceeded  to  ignore  in  favor  of  proposals  filled  with  gimmicks  instead  of  real  solutions.  And  the  Democratic  leaders  of  the  Senate  have  abandoned  altogether  their  legal  obligation  to  provide  a  budget  plan  –  it  has  been  three  years  since  the  Senate  passed  a  budget.   A  Choice  of  Two  FuturesBoth  parties  share  the  blame  for  failing  to  take  action  over  the  years.  But  while  Republicans  offered  a  budget  last  year  that  would  lift  the  crushing  burden  of  debt  and  restore  economic  growth,  the  President  and  his  party’s  leaders  are  still  refusing  to  take  seriously  the  urgent  need  to  advance  credible  solutions  to  the  looming  fiscal  crisis.  Instead,  they  are  still  offering  little  more  than  false  attacks  and  failed  leadership.  Questioned  about  this  disappointing  reality  at  a  recent  House  Budget  Committee  hearing,  Treasury  Secretary  Timothy  Geithner  admitted,  “We’re  not  coming  before  you  to  say  we  have  a  definitive  solution  to  our  long-­‐term  problem.  What  we  do  know  is  we  don’t  like  yours.”2  The  President’s  strategy  seems  to  amount  to  this:  Let  somebody  else  propose  a  path  forward,  and  then  attack  them  for  political  gain.This  budget  offers  a  better  path.  The  following  report  lays  out  the  challenge  –  and  the  choice  –  that  America  faces  in  each  key  area  of  the  budget.  The  common  thread  connecting  them  all  is  that  a  sharp  and  sudden  debt  crisis  would  threaten  the  entire  American  project:  It  would  weaken  national  security,  shred  the  safety  net  that  vulnerable  Americans  rely  on,  break  promises  to  seniors,  impose  massive  tax  increases  on  families,  and  leave  all  Americans  with  a  diminished  future.This  looming  crisis  represents  an  enormous  challenge,  but  it  also  represents  a  defining  choice:  whether  to  continue  down  the  path  of  debt,  doubt  and  decline,  or  put  the  nation  back  on  the  path  to  prosperity.  It  also  represents  a  tremendous  opportunity  for  this  generation  of  Americans  to  rise  to  the  challenge,  as  previous  generations  have,  and  fulfill  this  nation’s  unique  legacy  of  leaving  future  generations  with  a  freer,  more  prosperous  America. A  Blueprint  for  American  RenewalThis  budget  sets  forth  a  model  of  government  guided  by  the  timeless  principles  of  the  American  Idea:  free  enterprise  and  economic  liberty;  limited  government  and  spending  restraint;  traditional  family  and  community  values;  and  a  strong  national  defense.The  federal  government  has  strayed  from  these  American  principles.  This  budget  offers  a  set  of  fundamental  reforms  to  put  the  nation  back  on  the  right  track.  2  Timothy  Geithner,  Testimony  before  the  U.S.  House,  Committee  on  the  Budget,  The  President’s  Fiscal  Year  2013  Budget:  Revenue  and  Economic  Policy  Proposals,  February  16,  2012.House  Budget  Committee  |  March  20,  2012       12
  11. 11. The  role  of  the  federal  government  is  both  vital  and  limited.  When  government  takes  on  too  many  tasks,  it  usually  does  not  do  any  of  them  very  well.  Limited  government  also  means  effective  government.  This  budget  recommits  the  federal  government  to  the  security  of  every  American  citizen’s  natural  right  to  life,  liberty  and  the  pursuit  of  happiness,  while  fostering  an  environment  for  economic  growth  and  private-­‐sector  job  creation.1. Prioritize  Defense  Spending  to  Keep  America  SafeWith  American  men  and  women  in  uniform  currently  engaged  with  a  fierce  enemy  and  dealing  with  emerging  threats  around  the  world,  this  budget  takes  several  steps  to  ensure  that  national  security  remains  government’s  top  priority.  Providing  for  the  common  defense:  This  budget  rejects  proposals  to  make  thoughtless,  across-­‐the-­‐board  cuts  in  funding  for  national  defense.  Instead,  it  provides  $554  billion  for  national  defense  spending,  an  amount  that  is  consistent  with  America’s  military  goals  and  strategies.  This  budget  preserves  necessary  defense  spending  to  protect  vital  national  interests  today  and  ensures  future  real  growth  in  defense  spending  to  modernize  the  armed  forces  for  the  challenges  of  tomorrow.  Reprioritizing  sequester  savings  to  protect  the  nation’s  security:    The  defense  budget  is  slated  to  be  cut  by  $55  billion,  or  10  percent,  in  January  of  2013  through  the  sequester  mechanism  enacted  as  part  of  the  Budget  Control  Act  of  2011.3  This  reduction  would  be  on  top  of  the  $487  billion  in  cuts  over  ten  years  proposed  in  President  Obama’s  budget.  This  budget  eliminates  these  additional  cuts  in  the  defense  budget  by  replacing  them  with  other  spending  reductions.    Spending  restraint  is  critical,  and  defense  spending  needs  to  be  executed  with  effectiveness  and  accountability.  But  government  should  take  care  to  ensure  that  spending  is  prioritized  according  to  the  nation’s  needs,  not  treated  indiscriminately  when  it  comes  to  making  cuts.  The  nation  has  no  higher  priority  than  safeguarding  the  safety  and  liberty  of  its  citizens  from  threats  at  home  and  abroad.  2. End  Cronyism  and  Restore  Free  EnterpriseA  growing  economy,  increased  employment  and  higher  wages  will  come  from  traditional  American  ingenuity  and  enterprise,  not  from  government.  To  achieve  this  end,  small  businesses  need  to  be  empowered,  and  the  size  and  scope  of  Washington  need  to  be  reduced  so  that  the  hard  work  and  enterprise  of  Americans  can  lead  a  strong,  sustained  recovery.Ending  corporate  welfare:  There  is  a  growing  and  pernicious  trend  of  government  overreach  into  the  private  economy  –  a  trend  that  stacks  the  deck  in  favor  of  entrenched  interests  and  stifles  growth.  This  budget  stops  Washington  from  picking  winners  and  losers  across  the  economy.  It  rolls  back  corporate  subsidies  in  the  energy  sector.  It  ends  the  taxpayer  bailouts  of  failed  financial  institutions,  including  Fannie  Mae  and  Freddie  Mac.  It  repeals  the  government  takeover  of  health  care  and  begins  to  move  toward  patient-­‐centered  reform.  And  it  reduces  the  bureaucracy’s  reach  by  applying  private-­‐sector  realities  to  the  federal  government’s  civilian  workforce.Boosting  American  energy  resources:  Too  great  a  percentage  of  America’s  vast  natural  resources  remain  locked  behind  bureaucratic  barriers  and  red  tape.  This  budget  lifts  moratoriums  on  safe,  responsible  energy  exploration  in  the  United  States,  ends  Washington  policies  that  drive  up  gas  prices,  and  unlocks  American  energy  production  to  help  lower  costs,  create  jobs  and  reduce  dependence  on  foreign  oil.Streamlining  other  government  agencies:  Domestic  government  agencies  have  grown  too  much  and  too  fast  over  the  past  decade,  and  much  of  their  funding  has  gone  to  harmful  programs  and  dead-­‐end  projects.  This  budget  starts  to  restore  spending  discipline.  It  builds  on  efforts  undertaken  last  year  to  contain  the  government’s  growth,  and  it  targets  hundreds  of  government  programs  that  have  outlived  their  usefulness.  3  For  more  details,  see  Appendix  II  of  this  report.House  Budget  Committee  |  March  20,  2012       13
  12. 12. 3. Strengthen  the  Social  Safety  Net  This  budget  builds  upon  the  historic  progress  of  bipartisan  welfare  reform  in  the  late  1990s.  It  strengthens  Medicaid,  food  stamps  and  job-­‐training  programs  by  providing  states  with  greater  flexibility  to  help  recipients  build  self-­‐sufficient  futures  for  themselves  and  their  families.Repairing  a  broken  Medicaid  system:  Medicaid’s  flawed  financing  structure  has  created  rapidly  rising  costs  that  are  nearly  impossible  to  check.  Mandate  upon  mandate  has  been  foisted  upon  states  under  the  flawed  premise  that  the  best  ideas  for  repairing  this  important  health  care  safety  net  can  come  only  from  Washington.  This  budget  ends  that  misguided  approach  and  instead  converts  the  federal  share  of  Medicaid  spending  into  a  block  grant,  thus  freeing  states  to  tailor  their  Medicaid  programs  to  the  unique  needs  of  their  own  populations.Prioritizing  assistance  for  those  in  need:  The  welfare  reforms  of  the  1990s,  despite  their  success,  were  never  extended  beyond  cash  welfare  to  other  means-­‐tested  programs.  This  budget  completes  the  successful  work  of  transforming  welfare  by  reforming  other  areas  of  America’s  safety  net  to  ensure  that  welfare  does  not  entrap  able-­‐bodied  citizens  into  lives  of  complacency  and  dependency.  Ensuring  educational  and  job-­‐training  opportunities  for  a  21st  century  economy:  The  government’s  well-­‐intentioned  approach  to  higher  education  and  job  training  in  America  has  failed  those  who  most  need  these  forms  of  assistance.  Federal  tuition  subsidies  are  often  captured  by  (and  to  a  certain  extent  drive)  rapidly  rising  tuition  costs  for  those  higher-­‐education  programs  that  should  be  the  first  rung  on  the  ladder  of  opportunity.  Meanwhile,  dozens  of  job-­‐training  programs  suffer  from  overlapping  responsibilities  and  too  often  lack  accountability.  This  budget  begins  to  address  the  problem  of  tuition  inflation  and  consolidates  a  complex  maze  of  dozens  of  job-­‐training  programs  into  more  accessible,  accountable  career  scholarships  aimed  at  empowering  American  workers  with  the  resources  they  need  to  pursue  their  dreams.4. Fulfill  the  Mission  of  Health  and  Retirement  SecurityThis  budget  puts  an  end  to  empty  promises  from  Washington,  offering  instead  real  security  through  real  reforms.  The  framework  established  in  this  budget  ensures  no  disruptions  to  existing  health  and  retirement  benefit  programs  for  those  beneficiaries  who  have  organized  their  retirements  around  them,  while  at  the  same  time  building  stronger  programs  that  future  beneficiaries  can  count  on  when  they  retire.Saving  Medicare:  Medicare  is  facing  an  unprecedented  fiscal  challenge.  Its  failed  reliance  on  bureaucratic  price  controls,  combined  with  rising  health  care  costs,  is  jeopardizing  seniors’  access  to  critical  care  and  threatening  to  bankrupt  the  system  –  and  ultimately  the  nation.  This  budget  saves  Medicare  by  fixing  flaws  in  its  structure  so  it  will  be  there  for  future  generations.  By  putting  these  solutions  in  place  now,  this  budget  ensures  that  changes  will  not  affect  those  in  and  near  retirement  in  any  way.  When  younger  workers  become  eligible  for  Medicare  a  decade  or  more  from  today,  they  will  be  able  to  choose  from  a  list  of  guaranteed  coverage  options,  including  a  traditional  Medicare  fee-­‐for-­‐service  plan.  This  flexibility  will  allow  seniors  to  enjoy  the  same  kind  of  choices  in  their  plans  that  members  of  Congress  enjoy.  Medicare  will  provide  a  payment  to  subsidize  the  cost  of  the  plan,  and  forcing  plans  to  compete  against  each  other  to  serve  the  patient  will  help  ensure  guaranteed  affordability.  In  addition,  Medicare  will  provide  increased  assistance  for  lower-­‐income  beneficiaries  and  those  with  greater  health  risks.  Reform  that  empowers  individuals  —  with  a  strengthened  safety  net  for  the  poor  and  the  sick  —  will  guarantee  that  Medicare  can  fulfill  the  promise  of  health  security  for  America’s  seniors.Advancing  Social  Security  solutions:  The  risk  to  Social  Security,  driven  by  demographic  changes,  is  nearer  at  hand  than  most  acknowledge.  This  budget  heads  off  a  crisis  by  calling  on  the  President  and  both  chambers  of  Congress  to  ensure  the  solvency  of  this  critical  program.House  Budget  Committee  |  March  20,  2012       14
  13. 13. 5. Enact  Pro-­‐Growth  Tax  ReformThis  budget  recognizes  that  the  nation’s  fiscal  health  requires  a  vibrant,  growing  private  sector.  It  charts  a  prosperous  path  forward  by  reforming  a  tax  code  that  is  overly  complex  and  unfair.  Individual  tax  reform:  The  current  code  for  individuals  is  too  complicated,  with  high  marginal  rates  that  discourage  hard  work  and  entrepreneurship.  This  budget  embraces  the  widely  acknowledged  principles  of  pro-­‐growth  tax  reform  by  proposing  to  consolidate  tax  brackets  and  lower  tax  rates,  with  just  two  rates  of  10  and  25  percent,  while  clearing  out  the  burdensome  tangle  of  loopholes  that  distort  economic  activity.Corporate  tax  reform:  American  businesses  are  overburdened  by  one  of  the  highest  corporate  income  tax  rates  in  the  developed  world.  The  perverse  incentives  created  by  the  corporate  income  tax  do  a  lot  of  damage  to  both  workers  and  investors,  yet  the  tax  itself  raises  relatively  little  revenue.  This  budget  improves  incentives  for  job  creators  to  work,  invest,  and  innovate  in  the  United  States  by  lowering  the  corporate  rate  from  35  percent  to  a  much  more  competitive  25  percent  and  by  shifting  to  a  territorial  system  that  will  ensure  a  level  playing  field  for  American  businesses.6. Change  Washington’s  Culture  of  SpendingAcross  the  political  spectrum,  experts  agree  that  the  budget  process  is  badly  broken  and  in  need  of  reform.  The  process  fails  to  control  spending,  fails  to  provide  adequate  oversight,  and  fails  to  allow  the  transparency  needed  for  accountability  to  the  nation’s  citizens.  Controlling  spending:  The  budget  process  in  Washington  contains  numerous  structural  flaws  that  bias  the  federal  government  toward  ever-­‐higher  levels  of  spending.  This  budget  would  lock  in  savings  with  enforceable  spending  caps  and  budget  process  reforms,  limiting  what  Washington  spends  and  how  tax  dollars  are  spent.Enhancing  oversight:  This  budget  gives  Congress  greater  tools  to  perform  oversight  over  wasteful  Washington  spending.  Increasing  Transparency:  This  budget  promotes  reforms  that  would  give  taxpayers  more  information  over  how  Washington  is  spending  their  hard-­‐earned  dollars.  7. Lift  the  Crushing  Burden  of  DebtThis  budget  charts  a  sustainable  path  forward,  ultimately  erases  the  budget  deficit  completely,  and  begins  paying  down  the  national  debt.  Americans  truly  face  a  monumental  choice  –  a  choice  that  can  no  longer  be  avoided.  The  Path  to  Prosperity  advances  the  serious  conversation  begun  last  year  about  the  future  of  this  exceptional  nation  and  the  fundamental  choices  Americans  must  soon  make  about  the  kind  of  nation  they  want  America  to  be.  This  budget  would  put  in  place  a  comprehensive  framework  to  address  the  nation’s  greatest  challenges.  It  provides  a  blueprint  for  the  actual  work  of  statecraft.  The  elected  representatives  of  the  American  people  –  in  the  House  of  Representatives,  in  the  Senate  and  in  the  White  House  –  now  must  take  up  this  budget  and  start  building  the  future  Americans  deserve.House  Budget  Committee  |  March  20,  2012       15
  14. 14. House  Budget  Committee  |  March  20,  2012       16
  15. 15. PROVIDING  FOR  THE  COMMON  DEFENSE PROVIDING FOR THE COMMON DEFENSE KEY  POINTS The  safety  and  security  of  the  American  people  is  the  first  responsibility  of  the   federal  government. The  U.S.  military  is  threatened  by  an  uncontrolled  debt  burden  that  weakens   America  –  but  defense  spending  is  not  the  driver  of  that  debt  burden.   Despite  this  fact,  the  President’s  budget  refuses  to  address  runaway  entitlement   spending,  and  instead  imposes  nearly  $500  billion  in  defense  cuts  over  the  next   decade. This  budget  funds  defense  at  levels  that  keep  America  safe  by  providing  $554   billion  for  the  next  fiscal  year  -­‐  $6.2  trillion  over  the  next  decade  -­‐  for  national   defense  spending,  an  amount  that  is  consistent  with  America’s  military  goals  and   strategies. This  budget  replaces  the  indiscriminate  reduction  in  defense  spending  scheduled   to  take  place  under  the  sequester  with  targeted  reductions  in  non-­‐defense   mandatory  spending.  This  protects  defense  from  cuts  that  would  jeopardize   critical  missions  and  the  well-­‐being  of  soldiers  and  their  families.     America’s  troops  should  not  pay  the  price  for  Washington’s  failure  to  take  action.House  Budget  Committee  |  March  20,  2012       17
  16. 16.  House  Budget  Committee  |  March  20,  2012       18
  17. 17. PROVIDING  FOR  THE  COMMON  DEFENSE   The  Challenge:  A  Military  ThreatenedThe  first  job  of  government  is  to  secure  the  safety  and  liberty  of  its  citizens  from  threats  at  home  and  abroad.  Like  all  categories  of  government  spending,  defense  spending  should  be  executed  with  efficiency  and  accountability.  However,  because  it  is  the  first  responsibility  of  government,  the  national  defense  should  be  funded  based  on  strategic,  not  merely  budgetary,  calculations.  The  United  States  spends  a  great  deal  on  defense  in  nominal  terms,  but  defense  spending  is  shrinking  as  a  share  of  government  spending  and  as  a  share  of  the  national  economy.  The  share  of  the  nation’s  resources  devoted  to  defense  has  declined  from  its  Cold  War  average  of  7.5  percent  to  just  4.6  percent  today.  And  defense  spending  constituted  around  20  percent  of  federal  spending  in  fiscal  year  2011  –  below  the  25  percent  it  constituted  just  30  years  ago.  Defense’s  share  of  the  budget  is  projected  to  shrink  even  further  in  the  years  ahead  as  other  areas  of  the  budget  grow  to  unsupportable  levels.  This  category  of  spending  is  clearly  not  driving  the  unsustainable  fiscal  trajectory  that  is  threatening  the  nation’s  future. Simply  put,  America’s  dangerous  debt   trajectory  has  put  fiscal  policy  on  a   collision  course  with  her  national   security,  for  two  reasons.   First,  Figure  2  makes  it  very  clear  that,   absent  action,  Social  Security,   Medicare  and  Medicaid  will  soon  grow   to  consume  every  dollar  of  revenue   that  the  government  raises  in  taxes.  At   that  point,  policymakers  would  be  left   with  no  good  options.  Making  do   without  any  federal  government   departments,  including  the  military,  is   not  really  an  option  at  all,  and  neither  is   raising  taxes  to  a  level  that  no  free  and   prosperous  economy  could  sustain.   Of  course,  if  Congress  continues  to   ignore  the  drivers  of  the  debt,  it  will   lose  even  the  ability  to  make  such   choices  on  its  own  terms.  The  foreign  governments  and  institutional  lenders  that  finance  America’s  debt  would  cut  up  the  nation’s  credit  cards  before  things  got  that  far,  representing  a  sudden  and  severe  threat  to  the  nation’s  ability  to  defend  itself.  Second,  the  Budget  Control  Act  (BCA)  signed  into  law  last  year  created  an  automatic  sequester  process  to  force  $1.2  trillion  in  spending  reductions  over  ten  years  in  the  event  that  Congress  failed  to  produce  equivalent  reductions  through  a  specially  formed  Joint  Select  Committee  on  Deficit  Reduction  (JSCDR).  The  BCA  further  specifies  that,  after  accounting  for  reductions  in  debt-­‐service  costs,  a  total  of  $984  billion  in  net  spending  reductions  is  to  be  distributed  equally  among  defense  and  non-­‐defense  accounts  –  resulting  in  a  $492  billion  reduction  in  each.  To  put  this  in  perspective,  defense  constitutes  approximately  20  percent  of  total  federal  spending,  but  will  bear  50  percent  of  the  spending  reductions  through  sequestration.House  Budget  Committee  |  March  20,  2012       19
  18. 18. Because  the  JSCDR  failed  to  produce  a  bill,  the  sequester  is  scheduled  to  take  effect  beginning  in  January  of  2013.  While  the  sequester  serves  an  important  role  in  forcing  Congress  to  reduce  spending,  it  is  vital  that  those  spending  reductions  be  done  in  a  responsible  way.  Therefore,  policymakers  in  both  parties  agree  that  the  sequester  should  be  replaced  with  equivalent  deficit  reduction  to  ensure  that  the  national  defense  is  not  compromised.A  responsible  budget  must  recognize  that  the  United  States  is  a  nation  with  global  interests,  and  that  protecting  those  interests  requires  a  strong,  modern  and  capable  military.  The  Constitution  charges  Congress  with  the  responsibility  for  structuring,  building,  maintaining,  and  funding  that  military  capability.  It  is  a  responsibility  policymakers  must  make  a  top  priority. The  Choice:  Decline  as  a  World  Power  vs.  Renewed  American  LeadershipAmerica’s  fiscal  problems  pose  a  real  threat  to  its  military,  and  left  unaddressed,  these  problems  will  spell  decline  for  America  as  a  world  power.  The  need  to  address  this  threat  is  urgent.  But  decline  is  not  a  certainty  for  America.  Rather,  as  Washington  Post  syndicated  columnist  Charles  Krauthammer  put  it,  “decline  is  a  choice.”4Letting  budgetary  concerns  drive  national-­‐security  strategy  means  choosing  decline.  By  contrast,  putting  defense  first  among  government’s  priorities  while  simultaneously  lifting  the  debt  burden  and  ensuring  a  more  prosperous  America  would  enable  the  nation  to  afford  a  modernized  military  that  is  properly  sized  for  the  breadth  of  the  challenges  America  faces.Decline  as  a  World  PowerOn  January  5,  2012,  President  Obama  announced  new  defense  strategic  guidance  premised  on  the  hope  that  “the  tide  of  war  is  receding.”5  But  in  testimony  before  the  House  Budget  Committee,  Secretary  of  Defense  Leon  Panetta  acknowledged  that  the  administration’s  defense  drawdown  is  being  carried  out  in  the  face  of  ongoing  elevated  threats  to  the  United  States: SECRETARY  PANETTA:  But  despite  what  we  have  been  able  to  achieve,  unlike  past  drawdowns  when  threats   have  receded,  the  United  States  still  faces  a  complex  array  of  security  challenges  across  the  globe:  We  are  still  a   nation  at  war  in  Afghanistan;  we  still  face  threats  from  terrorism;  there  is  dangerous  proliferation  of  lethal   weapons  and  materials;  the  behavior  of  Iran  and  North  Korea  threatens  global  stability;  there  is  continuing   turmoil  and  unrest  in  the  Middle  East;  rising  powers  in  Asia  are  testing  international  relationships;  and  there  are   growing  concerns  about  cyber  intrusions  and  attacks.6Yet,  the  defining  characteristic  of  the  President’s  new  defense  posture  is  a  reduction  in  the  administration’s  own  defense  plan  from  last  year,  bringing  the  total  reduction  to  $487  billion  over  the  next  ten  years.  This  number  stands  out  as  significant  for  several  reasons.  In  the  President’s  latest  budget  proposal,  total  spending  increases  by  $1.5  trillion  and  taxes  increase  by  $1.9  trillion,  for  a  total  of  around  $400  billion  of  deficit  reduction  over  ten  years.  A  clear-­‐eyed  look  at  the  numbers  reveals  that  American  taxpayers  and  the  Department  of  Defense  are  being  asked  to  bear  the  entire  burden  of  deficit  reduction  under  the  President’s  budget.4  Charles  Krauthammer,  “Decline  is  a  Choice,”  The  Weekly  Standard,  October  19,  2009.  http://www.weeklystandard.com/Content/Public/Articles/000/000/017/056lfnpr.asp  5  President  Barack  Obama,  “Defense  Strategic  Guidance  Briefing,”  January  5,  2012.  http://www.defense.gov/transcripts/transcript.aspx?transcriptid=4953  6  Leon  E.  Panetta,  Testimony  before  the  U.S.  House,  Committee  on  the  Budget.  The  Department  of  Defense  and  the  Fiscal  Year  2013  Budget,  February  29,  2013.  http://budget.house.gov/UploadedFiles/Panetta_Testimony_2292012.pdf    House  Budget  Committee  |  March  20,  2012       20
  19. 19. Without  the  defense  cuts,  there  would  be  no  deficit  reduction,  and  without  the  tax  increases,  the  President’s  budget  would  represent  $1.5  trillion  in  additional  borrowing  to  finance  new  “stimulus”  spending. 7  Under  the  President’s  budget,  while  all  other  government  agencies  enjoy  a  generous  net  increase  in  their  allowance,  only  the  federal  government’s  highest  priority  –  defense  –  is  forced  to  make  do  with  less.The  President  has  asserted  that  his  new  defense  posture  is  driven  by  strategy  and  not  budgets,  but  his  timing  indicates  otherwise  –  he  announced  the  budget  figure  at  the  same  time  he  was  announcing  the  beginning  of  his  strategy  review.  Rather  than  choosing  to  lead  by  addressing  the  fundamental  drivers  of  near-­‐  and  long-­‐term  deficits  and  debt,  the  President  has  defaulted  to  slashing  the  defense  budget.  The  unmistakable  fact  is  that  the  President  has  chosen  to  subordinate  national-­‐security  strategy  to  his  other  spending  priorities.Renewed  American  LeadershipA  robust  national  defense  for  generations  to  come  can  only  be  sustained  on  a  sound  economic  foundation.  A  safer  world  and  a  more  prosperous  America  go  hand-­‐in-­‐hand.  Economic  growth  is  the  key  to  avoiding  the  kind  of  painful  austerity  that  would  limit  America’s  ability  to  exercise  both  hard  and  soft  power.  Today,  some  in  this  country  relish  the  idea  of  America’s  retreat  from  her  role  in  the  world.  They  say  that  it’s  about  time  for  other  nations  to  take  over;  that  America  should  turn  inward;  that  she  should  recede  from  her  unquestioned  ability  to  defeat  any  foe.      Instead  of  heeding  these  calls  for  retreat,  policymakers  must  renew  their  commitment  to  the  idea  that  America  is  the  greatest  force  for  human  freedom  the  world  has  ever  seen;  a  country  whose  devotion  to  free  enterprise  has  lifted  more  people  out  of  poverty  than  any  economic  system  ever  designed;  and  a  nation  whose  best  days  still  lie  ahead  of  it,  if  policymakers  make  the  necessary  choices  today.   The  Solution:  Providing  for  the  Common  Defense• Provide  $554  billion  for  national  defense  spending  in  FY2013,  an  amount  that  is  consistent  with  America’s   military  goals  and  strategies.• Reprioritize  sequester  savings  to  protect  the  nation’s  security. The  budget  resolution  offered  by  House  Republicans  ensures  that  the  men  and  women  who  each  day  risk  their  lives   in  defense  of  the  nation  will  continue  to  have  the  best  training,  equipment  and  support.  This  budget  is  not,   however,  a  blank  check  for  the  military.  To  the  contrary,  this  budget  builds  on  the  FY2012  budget’s  call  for  greater   efficiency  in  the  spending  of  defense  dollars.  Last  year,  the  budget  reduced  the  defense  program  by  $78  billion  over   ten  years  to  capture  savings  from  the  efficiencies  identified  under  the  leadership  of  Secretary  Gates.  This  year,   another  $60  billion  of  identified  efficiencies  are  devoted  to  mission-­‐critical  defense  priorities,  including  savings   recommended  by  Secretary  Panetta. This  budget  resolution  ensures  that  the  base  defense  budget  will  not  be  cut  during  wartime.  The  President’s   defense  budget  request  is  2.5  percent  lower  in  real  inflation-­‐adjusted  dollars  than  what  Congress  provided  for  this   year.  The  House  Republican  budget  provides  level  funding  for  defense  so  that  the  military  has  adequate  funds  to   accommodate  higher-­‐than-­‐anticipated  fuel  prices,  to  maintain  training  and  readiness,  and  to  keep  faith  with   America’s  soldiers,  sailors,  airmen,  and  marines. Over  the  ten-­‐year  period  covered  by  the  budget  resolution,  this  budget  restores  about  half  of  the  funding  cut  by  the   President  and  ensures  that  the  defense  budget  grows  in  real  terms  in  each  year  –  providing  adequate  funding  to   maintain  a  robust  end-­‐strength  and  to  address  the  years  of  forgone  equipment  modernization.  7  “Analysis  of  the  President’s  Budget  for  FY  2013,”  U.S.  House  Budget  Committee,  February  24,  2012.  http://budget.house.gov/UploadedFiles/POTUS_FY13budget.pdf  House  Budget  Committee  |  March  20,  2012       21
  20. 20. Congress  has  no  higher  responsibility  than  to  ensure  that  the  President  has  available  all  the  tools  necessary  to   protect  the  national  security.  This  budget  meets  that  responsibility.  House  Budget  Committee  |  March  20,  2012       22
  21. 21. RESTORING  ECONOMIC  FREEDOM RESTORING ECONOMIC FREEDOM KEY  POINTS The  free  enterprise  system  is  being  stifled  by  an  epidemic  of  crony  politics  and   government  overreach  that  has  weakened  confidence  in  the  nation’s  institutions   and  its  economy. This  budget  gets  Washington  out  of  the  business  of  picking  winners  and  losers,   and  restores  fiscal  discipline  with  over  $5  trillion  in  cuts  to  government  spending   so  the  private  sector  can  grow.     This  budget  repeals  the  President’s  health  care  law  –  curbing  the  federal   government’s  overreach  into  personal  health  care  decisions  –  and  instead  moves   toward  patient-­‐centered  reforms.   This  budget  reverses  the  President’s  policies  that  drive  up  gas  prices,  and  instead   promotes  an  all-­‐of-­‐the-­‐above  strategy  for  unlocking  American  energy  production   to  help  lower  costs,  create  jobs  and  reduce  dependence  on  foreign  oil.   This  budget  unwinds  government  control  over  the  housing  giants,  Fannie  Mae   and  Freddie  Mac,  so  they  no  longer  expose  taxpayers  to  trillions  of  dollars’  worth   of  risk. This  budget  revisits  flawed  financial-­‐reform  regulations  and  eliminates  provisions   that  make  future  bailouts  of  Wall  Street  insiders  more  likely.  House  Budget  Committee  |  March  20,  2012       23
  22. 22. House  Budget  Committee  |  March  20,  2012       24
  23. 23. RESTORING  ECONOMIC  FREEDOM The  Challenge:  A  More  Bureaucratic  and  Less  Free  AmericaFor  decades,  the  U.S.  economy  has  been  a  magnet  for  investors,  entrepreneurs  and  workers  because  America  enjoys  some  of  the  strongest  and  most  transparent  legal  protections  in  the  world.  These  protections  provide  a  stable  environment  for  business  investment  –  stability  that  is  undermined  when  the  discretionary  power  of  bureaucrats  is  enhanced.  The  United  States  still  enjoys  an  enormous  edge  over  most  of  the  world  when  it  comes  to  the  strength  of  its  institutions  and  its  respect  for  the  rule  of  law.  But  America  is  moving  in  the  wrong  direction,  and  job  creators  have  taken  notice.  In  too  many  areas  of  the  economy  –  especially  energy,  housing,  finance,  and  health  care  –  free  enterprise  has  given  way  to  government  control  in  “partnership”  with  a  few  large  or  politically  well-­‐connected  companies,  and  the  rule  of  law  is  being  replaced  by  the  whims  of  politicians.  The  economy  will  not  grow  to  its  potential  until  government  restores  certainty  and  confidence  by  eliminating  the  cronyism  that  inevitably  results  when  government  assumes  the  power  to  pick  winners  and  losers  through  its  taxing,  spending,  and  regulatory  might.    Energy  The  President’s  energy  policies  have  been  characterized  by  punitive  regulations  on  economically  competitive  sources  of  energy,  coupled  with  reckless  spending  on  uncompetitive  alternatives.  Even  in  the  midst  of  failed  stimulus  outcomes,  the  administration  presented  another  budget  this  year  with  yet  another  energy  stimulus  program.  The  President’s  FY2013  budget  would  increase  energy  spending  government-­‐wide,  including  both  discretionary  and  mandatory  spending,  by  almost  90  percent  over  last  year’s  enacted  levels,  and  138  percent  over  FY2011.  Since  the  introduction  of  this  failed  energy  policy  in  the  2009  stimulus  bill,  the  Department  of  Energy  (DOE)  has  issued  $20  billion  in  new  loan  guarantees  for  renewable  energy  projects.  The  most  notorious  of  these  –  solar  start-­‐up  Solyndra  –  received  a  loan  guarantee  for  $535  million  in  the  fall  of  2009,  even  after  repeated  warnings  from  federal  financial  analysts  about  the  firm’s  financial  shakiness.  Meanwhile,  advocates  of  green  energy  have  argued  that  it’s  not  enough  for  the  government  to  subsidize  alternatives  –  it  should  also  promote  policies  that  make  commercially  competitive  sources  of  energy  more  expensive.  Then-­‐candidate  Obama  agreed,  arguing  in  January  of  2008:  “Under  my  plan  of  a  cap  and  trade  system,  electricity  rates  would  necessarily  skyrocket.”8This  was  the  idea  behind  the  controversial  “cap  and  trade”  bill  that  President  Obama  tried  and  failed  to  pass  through  Congress  in  2009,  which  would  have  established  an  elaborate  bureaucratic  structure  for  taxing  and  rationing  conventional  energy  sources.  But  instead  of  accepting  this  verdict  on  its  preferred  policy,  the  administration  continued  to  pursue  de  facto  cap  and  trade  approaches  by  supporting  the  Environmental  Protection  Agency’s  (EPA)  unilateral  plan  to  impose  emissions  restrictions  on  American  businesses.  The  push  by  the  Obama  administration  to  pursue  energy  and  environmental  policy  through  heavy-­‐handed  regulations  circumvents  accountability  to  voters  and  leaves  decisions  in  the  hands  of  a  bureaucratic  infrastructure.  Unnecessary  regulations  tie  the  hands  of  small  businesses  and  create  a  hostile  and  uncertain  business  environment,  discouraging  job  growth.  8  Senator  Barack  Obama,  San  Francisco  Chronicle  editorial  board  meeting,  January  17,  2008.http://www.sfgate.com/cgi-­‐bin/object/article?f=/c/a/2008/01/20/EDIAUHASH.DTL&o=0  House  Budget  Committee  |  March  20,  2012       25

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